Category Archives for "Finances & Careers"

4 Personal Finance Tips for the Self-Employed

By Dustin | Finances & Careers

By Molly Barnes, Digital Nomad Life

If you’re self-employed, you’re not alone. Despite a slight dip in April, self-employment figures have been rising consistently, hitting their highest level in three years at 9.876 million in March.

The economy is changing, and how people work is changing with it. That creates a need to adapt in other areas of life, too, including relationships and finance.

But how do you do that? Factors such as long hours; inconsistent income, and the uncertainty of self-employment can cause stress you might not find in a traditional workplace environment.

And that doesn’t begin to address the potential disconnect between your own goals and those of your partner. To meet these challenges, consider the following:

Separate your accounts

Creating separate business and personal accounts can help you track your income and expenses more easily, as well as keeping your records straight for tax purposes.

When it comes to financing, you can fund your business out of your own pocket (in fact, you may have to), but you also may be able to call upon outside sources like investors and crowdfunding. Seeking bank loans is another possibility. 

Obtaining outside financing means you’ll have less control, which could lead to greater stress because you’ll also be responsible to others for creating success. But you’d be motivated to do that, anyway. 

Separating your accounts can help your relationship by making it clear to your spouse that you’re not using family funds to pay for your own dreams — at least not immediately or directly. This can give your partner assurance that you’re putting the family first and add to the level of security in your relationship.

Aim high, budget low

You have big goals for your business, but that doesn’t mean you can count on a certain income. In fact, one of the trickiest parts of self-employment is not knowing how much money you’ll make from one month to the next.

When you’re creating a personal budget, start with your lowest monthly income as your baseline. This can reduce your stress level as much as possible, while at the same time keeping you from overspending.

List your regular expenses, like utilities, rent/mortgage, car payment, fuel costs, food, etc., and go from there. Don’t forget costs like insurance, property taxes, and an emergency fund. Then you can add nonessential items like eating out, taking in a movie, streaming services, social club memberships, and so forth. 

If you’ve got money left over after the essentials are paid, it may be tempting to reinvest in your business. But remember to think of your relationship, too. If you don’t spend anything on personal enjoyment, it will be easier to burn out. And neglecting to invest in quality time with your significant other can lead to hard feelings, possibly causing your relationship to suffer.

“Investing” implicates time and attention, as well as money. Finding the perfect work-life balance can feel like an unattainable goal. But you can approach a reasonable balance by creating boundaries between your home and work lives, both will benefit in the long run.

Have a backup plan

Obviously, having a backup plan is important when you’re running your own business. Unlike a traditional job, there’s no employer to act as a safety net if you make a mistake: It’s all on you. Consider these building blocks for your backup plan.

Insurance

Just as insurance is necessary for your personal life, it’s important for your business, too. The Small Business Association lists six types of insurance small businesses should consider — some of which may be legally required in your state. 

Protection against liability for product defects and injury, accusations of negligence, and property loss because of bad weather or other unforeseen crises are just some of the possibilities you should consider.

Credit

You’ll also want to have good credit if you need it, not only for investments but also to provide a cushion in the event of hard times. Know your credit score and understand the factors that go into it. Then you’ll be positioned to build your credit standing so you can prepare for success and provide a safety net for the future.

Technology

These days, having a backup means backing up your computer files, too. Store copies of all your important files on an external hard drive and/or the cloud. But if you put anything online, make sure your password’s protected and be aware of phishing and ransomware scams. 

It’s also important to be able to weather any storms, literally. In addition to saving your changes regularly, invest in a surge protector for your electronics and other hardware. You may even want to consider a backup generator so you can keep working if the power goes out (especially if you live in an area prone to weather disruptions). After all, any disruption in work is a disruption in income. 

Include your partner

One surefire way to build resentment in a marriage is to make major life decisions without your partner’s input. If you were traditionally employed, you wouldn’t take a job in a different city without talking to your partner. You shouldn’t make big self-employment decisions without their input, either.

Not only will talking to your significant other keep you both invested in your life together, but also you’ll access a different perspective and a wealth of ideas you may not have considered, both of which could benefit your business.

It can be a challenge to stay engaged in both aspects of your self-employed and married life. But if you include your partner, create personal and financial boundaries, and have a Plan B, you’ll put yourself in the best possible position to succeed.

Why Does Marital Status Affect Car Insurance Rates?

By Dustin | Finances & Careers

Auto insurers measure how much of a risk you pose against a number of factors. These include demographics, location, profession, driving record, type of vehicle, credit score, and claims history.

But did you know they also take marital status into account and offer lower rates to married people? 

Why insurers charge married people less for car insurance

While this doesn’t seem fair on the surface, the insurance industry has its reasons for using marital status to determine car insurance rates.

1. Single people are often younger 

Research shows that car crashes are higher among young people. This is largely due to their lack of driving experience and engaging in distracted driving behavior like texting and driving. 

In the U.S., teens are most at risk of car crashes. In the UK, it’s drivers aged 21-29 who have the most car crashes. Whether teen or twenty-something, younger drivers are more reckless.

As single people are often younger, insurance companies view them as riskier drivers.

2. Married people are seen as more responsible

Once you get married, mortgages, bills, and steady jobs tend to follow.

Insurance companies see married people as more mature, responsible, and financially stable. Even males 25 and younger (who typically pay the highest insurance rates), receive a discount on car insurance when they wed, provided they have no major blemishes on their driving record.

3. Married people with kids tend to be safer drivers

What else follows marriage? Kids.

Once a baby arrives, parents tend to become safer drivers. According to a survey by IDriveSafely.com, despite the fact fretful babies and toddlers pose a distraction while driving, 82% of parents still believe that they became safer drivers with a baby in the car.

Parents of teenagers also become more aware of their driving behavior as they try to set a good example when their teen learns to drive. 

4. Married couples are more likely to take bundled packages 

Many insurance companies offer home and car bundles or multiple car policies at discounted rates.

As a family with multiple drivers or multiple policies, you’re giving the insurance company more business. That, for one, makes them happy. In addition, being a homeowner or adding life insurance is another indicator of financial responsibility, so insurers are willing to reward you with lower rates. 

5. Married people may drive less

Married people may use one car to drive to work, social events, or the grocery store, which means one partner is driving less. Less miles can lower your premiums, even if you’re not married, so chat to your insurer if you are driving less. 

Living the single life can also mean being out at night and drinking more. This not only adds more miles to the clock but also increases the risk for drunk-driving accidents.

Married people with families, on the other hand, are more likely to stay home, safe and sound. 

Single vs married: How much do you pay?

According to The Zebra, married people pay, on average, $75 less per month than single people. But this isn’t only directed at people who never married. Divorced and widowed drivers are also penalized, paying $86 and $50 more, respectively. 

So when did this practice start? Many insurance companies refer to a 2004 study by the National Institute of Health conducted in New Zealand using data collected between 1988 and 1998. It showed that out of 10,525 participants, 139 driver injuries occurred. The study concluded that never married people had a higher risk of driver injury than married people. 

The problem with this study is that the sampling was small, the accidents few, it tracked driving behavior in a different country, and it is now hopelessly outdated.

Should marital status influence car insurance rates? 

It makes sense to include factors like age, location and type of car you drive. Younger inexperienced drivers are more likely to be involved in car accidents. A high crime area increases the risk for car break-ins and theft, and an expensive car will cost more to repair. 

What is being questioned is why factors like gender and marital status are used to influence rates. In some states, like California and North Carolina, insurance companies are no longer allowed to use gender to determine rates. Five states (Hawaii, Massachusetts, Michigan, and Montana) also ban marital status. 

The Consumer Federation of America (CFA) advocates against using non-driving behavior, like marital status, gender, education, occupation, and credit scores, to determine rates. The number of car accidents, traffic violations, and miles driven are more solid indicators of risk. 

Single, separated and divorced persons also tend to have lower incomes and hiking their car insurance premiums adds to their financial strain. The CFA sees it as discriminatory against low- and moderate-income Americans.

Insurance companies say research backs them up, but is it fair to treat all single people or all married people as an equal risk? I guess that’s a question for the actuarial tables to answer.

3 Keys to Winning with Money in Your Marriage

By Dustin | Finances & Careers

“Always remember that you are a team. God has made you to work together. By combining your individual perspectives and respecting your partner’s strengths, God will use you in ways that you could never imagine and you will achieve goals that often seem impossible.”

For decades, I have written this paragraph (or something closely resembling it) on every card that I give to newlyweds. The advice is hard won, through years of making mistakes in my own marriage – mistakes which all began with money. 

My experience with disastrous money discussions began early in my marriage. In August of 1988, I had been married for ten, short weeks. Arriving home from work, I gathered the mail from the mailbox as I entered our apartment. Our monthly bank statement stared at me from the pile of assorted magazines, advertisements, and bills. 

I opened it, never expecting what met my eyes. I glanced down the row of cancelled checks. Everything seemed in order. 

Then, I saw it – the total at the bottom of the page. Our account balance was nearly zero! 

We were broke! 

How could this be possible? We weren’t living extravagantly (at least it didn’t seem that way). 

Numbers don’t lie. 

I realized that I needed to do something – and do it quickly – if we were to avoid disaster. 

A month later, I had written a budget, detailing exactly how we were going to spend our money. My husband arrived home from work and I announced unceremoniously, “We are out of money. I have come up with a plan. We need to move to a cheaper apartment. Oh, and I need you to get on board!” 

Predictably, this conversation did not go well. 

Clearly, I had a thing (or two) to learn about money conversations (and communication, in general) in a marriage. 

That was over thirty years ago. Since that time, Larry and I have learned to work together as a team. We have lived debt free, paid cash for cars, and bought a home with cash – all while raising four sons on an income which was consistently under the US national average. 

How did we do it? 

We followed these three “rules of money engagement”. 

1. Respect Your Partner

Every good partnership begins with mutual respect. Clearly, when I took it upon myself to determine how we would spend money as a couple (without even consulting my husband), I was disrespecting his position as my life partner. 

You are not autonomous in a marriage. When the pastor said, “You are now one”, it meant that you no longer had to navigate life alone. Your spouse is your team mate. 

In sports, a good coach never leaves a vital player on the sidelines – and certainly doesn’t fail to share the playbook with him. 

Larry and I often tell couples whom we are counseling, “If you aim at nothing, you are sure to hit it.” 

A budget is your roadmap, allowing both of you to know the game plan. It lays out the steps that you are both committed to taking to reach your goals. When it comes to money, if you refuse to involve your spouse in the process, then you’ll find it difficult to make headway. 

Mutual respect equates to mutual decisions. 

2. Appoint a “Designated Driver”

My husband is a last born. He lived at home until we married, paying his parents a moderate amount of rent. I am a middle-born, who moved out of my mother’s home at the age of twenty, lived with roommates, and figured out how to navigate life on a low income. 

Not only were our experiences different, so were our perspectives on money.

Despite the fact that we were both making just $5/hour, my husband and I had exactly zero conversations about budgeting before we married. 

Three weeks after we wed, I freaked out when he came home and announced that he was headed over to Radio Shack to spend $50 on some sort of electronic stereo component that (in my opinion) we absolutely did not need.  

I “calmly” (okay, not calmly at all) shouted at him that unless he intended to eat that pricey toy, he’d better not leave the apartment. I needed that money for groceries. 

He was stunned. “Why not? I looked at our checking account. We have the money in the bank.” It had, simply, not occurred to him that there was another purpose for that cash. 

I showed him the nearly empty cupboards. Suddenly, Larry completely understood that his decisions impacted our family. He was no longer a free agent. He was a member of a team. 

That night, we agreed that neither of us would spend over $10 without first checking with the other and I was appointed the family budget guru. No, I didn’t have complete control. I could not unilaterally begin making monetary decisions. I tracked the expenses, totaled up the budget columns every month, and set the agenda for our monthly budget meeting. 

If you’ve ever heard the saying, “Too many cooks spoil the broth,” it’s true. The more hands dipping in and out of the family coffers, the greater the confusion (and possibility for errors). 

Figure out which of you is best at tracking the numbers, and let them do the driving. (They will, seriously, enjoy it.) However, all the family financial decisions are talked about and agreed upon during a monthly budget meeting. 

3. Recognize (and Embrace) Your Differences

There is some truth in the old saying that “opposites attract.” Most likely, you were attracted to your partner because you recognized something in them that was lacking in yourself. 

When you meld these differences into a single plan of action, you can make amazing headway on goals. 

My husband is a spender and I am a saver. 

As the “budget nerd,” I become so obsessed with counting nickels and dimes, that I forget how to enjoy spending the money after we reach a goal. Alternately, my free-spending spouse has learned to check in with me before making a purchase. 

Half way through a recent, weekend getaway to Madison, Wisconsin, I began to feel guilty about the money we were spending. 

Larry took my hand and reminded me gently, “Honey, you did a great job planning this trip. You got us a deal on the hotel. You researched the cost of every attraction and restaurant. We saved up money for this trip. Every penny that we are spending is coming out of that fund. I need you to relax, be in the moment with me, and enjoy yourself. You have earned it.” 

He was right. 

Here’s the bottom line when it comes to money and marriage: When you each lean into the other’s strengths, your life becomes more balanced, more stable, and more peaceful. As a couple, you’ll be able to grab great, big goals with both hands and refuse to let go. 

It all begins with freely admitting and embracing that you are stronger together, working as a team, and respecting your partner. 

About the Author

Hope Ware has been a writer and public speaker for 35 years. Married to Larry since 1988, she has four sons and has homeschooled for 20 years. 

Hope and her husband raised their sons debt-free, including paying cash for their home, on an income which was consistently under the US national average. They discovered the secrets of spending less, saving more, and living with a spirit of joy and abundance. 

Hope and Larry dispense humor and practical advice about finances at their website: www.underthemedian.com and on their popular YouTube channel: https://www.youtube.com/c/underthemedian/ 

When she’s not speaking or writing, you’ll find her speed walking while humming songs of the 70’s, creating vegan versions of classic American comfort food, or singing jazz and spirituals with her friends and fellow musicians in the Heritage Ensemble.

Managing Finances in Marriage: The Happy Couple’s Guide to Success

By Dustin | Finances & Careers

Arguing about money is such a common problem in marriage that it’s almost a cliché. While couples certainly fight about other issues, managing finances in marriage properly is something that can stop a lot of arguments before they start.

The key to managing finances in marriage is communication. If you don’t talk about money when you’re both in a calm state of mind, you’re certainly not going to be able to discuss it when you’re having a problem that’s related to money.

Fortunately, we’re here to help. There are some things you can do now that will set you up for financial stability in the future.

Identify Financial Areas of Concern

Sometimes, couples make the mistake of overlooking certain aspects of financial planning. They might focus on household expenses but forget to talk about insurance.

Here are the crucial aspects of finance that should be part of your conversations as husband and wife.

1. Budgeting
2. Investment planning
3. Tax planning
4. Retirement planning
5. Insurance planning
6. Estate planning
7. College planning (if you have kids)

The goal should be to take as comprehensive a look at your finances as possible. That way, you can plan everything and reduce the likelihood of being caught by surprise.

Long-Term Financial Goals

Once you’ve identified all the areas of your finances to discuss, you can start by opening up a conversation about your long-term financial goals. Where do you want to be in:

• One year?
• Three to five years?
• Ten years or more?

Looking at the big picture first is necessary because it can help you set the right kind of goals – what we like to call SMART goals. That means that your goals must be:

• Specific
• Measurable
• Actionable
• Realistic
• Time-bound

In other words, this isn’t the time for nebulous, poorly-defined goals.

Managing Finances in Marriage with a Budget That Works

With your goals in hand, the next step is creating a budget to help you control your spending and save money to meet your goals.

We recommend using the three bucket system for budgeting. The buckets work like this:

1. Bucket #1 is the Static Bucket. It’s for your fixed expenses, the things that stay the same each month, including your rent or mortgage, utility bills, cell phone bills, and insurance premiums. It should account for no more than 50% of your income.
2. Bucket #2 is the Control Bucket. This bucket is for your regular but variable expenses, including things like groceries, gas, eating out, and entertainment. It should account for no more than 30% of your income.
3. Bucket #3 is the Dynamic Bucket. This bucket is for things that aren’t regular expenses, and may include extra debt payments, savings, or even a vacation or holiday fund. It should account for at least 20% of your income.

Be sure to check out our full guide to budgeting for married couples. Your budget will help you with the next step.

Automate Your Finances

One of the keys to good financial management for married couples is automation. We all get busy and distracted at times, but you don’t want your credit rating or finances to suffer as a result.

Automation works in two ways. For the things in your Static Bucket, the best way to automate is to set up an account for those budget items, transfer money into it when you get paid, and sign up for automatic bill payments whenever possible.

The items in the other two buckets can’t be automated in this way. However, you can set up separate accounts and transfer 30% and 20% of your paycheck respectively into each of the two accounts.

You may want to make the 20% transfer for your Dynamic Bucket into an interest-bearing savings account. From there, you can always transfer some to an IRA or to a checking account so you can make extra debt payments.

Pay Down Your Debt

If you’re carrying any credit card debt, use some of the money in your Dynamic Bucket to pay it down as soon as possible. You might not think it makes much of a difference, but let’s look at an example.

Imagine you have $3,500 of debt on a credit card with a 14% interest rate. If you make the minimum monthly payment of $75.83 per month, it will take you 19 years to be debt-free and you’ll have paid $3,583.18 in interest.

Add an additional $10 over the minimum payment each month, and your payment time is reduced to 4 years and 8 months. $20 over the minimum brings it down to four years, and $50 over the minimum would mean that you’d be able to pay off the debt in 2 years and 10 months.

How Much Interest are You Really Paying?

Not only is the timing more favorable, but you’ll end up paying significantly less in interest, too. You already know you’d be paying more than $3,500 in interest on the 19-year plan. Here’s how the extra payments help:

• $10 a month extra reduces your interest total to $1,278.74
• $20 a month extra reduces your interest total to $1,087.92
• $50 a month extra reduces your interest total to $756.11

If you can budget $50 a month toward debt reduction, you can save almost $3,000 in interest. That money could go toward a down-payment on a new home or car, or it could pay for a family vacation.

Two Approaches to Paying Down Debt for Managing Finances in Marriage

You can choose between two methods if you have debt to pay down. The first is the snowball method, which pays off the lowest balance first before moving onto the next balance.

The second is the avalanche method, which pays off the balance with the highest interest rate first. You should choose the one that works best for you.

We recommend being as aggressive as you can afford to be while paying down debt. The benefits and savings are clear, and this is a critical first step to successfully managing finances in marriage.

Maximize Your Retirement Savings

Once your debt reduction plan is in place, you can turn your attention to saving for retirement. You can and should take advantage of:

• Work-related retirement plans like 401(k), 403(b) and pension plans
• Individual retirement savings accounts like IRAs and Roth IRAs
• Social Security

Make sure to take advantage of employer matching funds, which many companies offer to employees who enroll in a 401(k) or 403(b) plan.

You should also Vanguard’s retirement calculator, which you can find here, or the Flexible Retirement Planner, which you can find here.

Finally, you may want to consider making some investments outside of your retirement plans. Some to consider, from most to least risky, include:

• Art/Collectibles
• Stocks
• Real Estate
• Corporate Bonds
• Government Bonds
• CDs and Money Market Accounts

You should diversify your investments to minimize your risk. It’s never a good idea to put all of your financial eggs in one basket.

Make Managing Finances a Shared Goal

Perhaps the most important financial goal you can have in your marriage is to talk about money regularly.

After all, your finances affect both of you, and your kids if you have them. Talking to your honey about money will minimize conflict and maximize your chances for success.

If you’d like to dig deeper on the topic of managing finances in marriage, be sure to check out our full step-by-step workshop with our favorite financial planner.